5 real reasons why startups fail!

The immediate reaction once you know that you are in the phase of failing is to jump ship and head towards the first exit and disappear for a few years. This may arise due to the amount of money put into the startup that could have been used for lets say, having a fantastic time with family and friends, buying more property or simply relax till the end. What the heck is the end anyway?
From my point of view, we are not that breed. We come from a different lineage. We cannot stop when it's not hot. We need to move and make it happen. It maybe an addiction, but it is you see. It is the core of what we were put on earth for.

To make a difference, no matter what. If anyone reads this and says that they failed, I say that it isn't true. Why? Because, this is how it is supposed to be. Everything, the earth, stars, planets, rocks, the old man and the sea and your blooming business, is supposed to be in this state at this given point of time.

Your life is like a rubix cube. You will not understand it halfway, but because of natural algorithms, it was already set in play millions of years ago and again, you must understand it all comes right in the end. The following line maybe difficult to understand, but you will, when it is time - "Walk the path, don't think it, it will guide you. Once you start thinking then resistance emerges and you will go astray".

Now that we have digressed, we need to reel back to the 5 real points of why startups fail:

1. No market - You need to understand that there has to be a whole lot of research that goes into finding out how and why you will succeed in the market. (Read Lean Startup)
2. Lack of ownership - You cannot have a full fledged business and start a start up. That is just totally insane. You need to jump into a start up and stay there until you succeed or fail. No safety nets please, except for a money cushion.
3. No cash - Do not get an office if you don't need one. Get an office and the works through the income that you earn from the business. Even then if you don't need one, don't get it. Overheads are like, you trying to kill yourself and acting stupid about it.
4. Hire the wrong team - Don't hire a team if you don't need one right away. Once you hire, then you must hire a resource who takes over that particular responsibility completely, and they should do it much better than you can. You should not be there to guide them except in the beginning.
5. Do it all yourself - Remember you cannot do it all yourself. It is a good thing that you know how to, but that's not the way to go. I remember that I tried to work all departments even though I hired resources. It just isn't right because you really need to learn the art of delegating work and responsibility. The question arises that if something is delegated then what if the person doesn't really do the job? This was something I battled the first time, but like I mentioned before, it all comes right in the end. Few bumps ahead initially and the road becomes smooth.

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Is "free shipping" in Indian e-commerce dying?

I remember, in early days of e-commerce, everyone used to talk about how e-commerce is far more efficient than physical retail because one doesn’t have the cost burden of physical stores. And therefore, e-commerce players can offer great discounts and free shipping by “passing on” these benefits to consumers. I guess everyone wanted to emulate Amazon, whose legendary head, Jeff Bezos, has repeatedly said that their only goal is to keep bringing down costs and pass on these benefits as reduced prices to consumers.
Now, as the pressure to improve P&L mounts, one is beginning to see some crucial changes in the way e-commerce business is conducted in India. We have seen Jabong shrink in size. Jabong’s Net Revenues, as reported by Rocket Internet in their 14th April 2016 filings, for Q4 of CY2015 were at Rs 218cr, down 19% YoY (yes, you read it right) versus Rs 271cr in Q4 CY2014. Total transactions in the same quarter for Jabong shrunk even more – 1.9 million v/s 3 million, which is shrinkage by 37%.
One of the headlines in recent news reports was Myntra’s categorical statement about systematic reduction of discounts – “1 percentage point every month”. This would, obviously, directly help reduce cash burn. Assuming Myntra has a monthly GMV of, say, USD 50 million, every 1% discount reduction would mean $6 million less funding requirement in one year. 5 percentage points reduction means $30 million less funding for the year, and that's a lot of capital saved.

That’s not the whole story though. Another important chapter of the story is the slow death of “free shipping”. A couple of years ago, everyone had Free Shipping as the norm - with no minimum purchase requirements. Then came the minimum purchase requirement, which varies across portals, for availing Free Shipping.

And in recent times, players have upped the charges for delivery. Myntra is one of the examples. In fashion e-commerce, typically, customers have a basket size of about Rs 1500. In this context, Myntra’s minimum order value requirement of Rs 999/- is significant. Also, the charges for order value below Rs 999 are now at Rs 149. Yes, you read it right, it is Rs 149/-. A player like YepMe, which serves more value-conscious consumers with merchandise that’s at the lower-end of pricing as compared to Myntra’s assortment, is now charging Rs 99/- for each order. No free shipping at all, no matter what’s your order value.

Now, this is a crucial development. It obviously helps players reduce their cash burn and helps them progress on the path to profitability. But for a consumer, this is quite a departure from the norm of “free shipping”. Most players continue to talk about free shipping with usual T&C applied, but looks like more and more shipments are now with delivery charges.
So how does the cash outlay for consumers change – I looked at a UCB t-shirt, which was available at 40% discount. But the math turns out as follows:

1. MRP – Rs 1299/-
2. Discount – Rs 520/- (@40% of MRP)
3. Sub Total – Rs 779/- (@60% of MRP – so far so good)
4. VAT/CST collected – Rs 39/- (@5% of the discounted price)
5. Delivery Charges – Rs 149/- (whoa!!! That’s nearly 20% of the discounted price)
6. Total payable – Rs 967/- (Hmm…..in effect, my discount is only Rs 366, i.e., 25% and not 40%)

So what started off as a 40% discount lure for a consumer, ends up at only 25% discount, unless the consumer decided to add something else to the cart to make it Rs 1000 or more in value terms.
An alternative approach would be to directly reduce the discount itself, instead of using the Delivery charge route, to improve order economics. I guess that’s more in-the-face of the consumer and has the risk of putting her/him off. And therefore, it seems that players have chosen to use the somewhat indirect route of delivery charge.

As for the big-three horizontal players (Flipkart, Snapdeal and Amazon), the range of shipment charges varies basis the seller or fulfillment option. Independent sellers on these marketplaces can, by-and-large, define their own delivery charge and indeed do so in many cases. For instance, a male t-shirt with net sale price of Rs 599-799 may have a delivery charge of Rs 30-70 by the seller. Similarly, women dresses with a sale price of below Rs 500 are being offered at delivery charges of Rs 30-75. These sellers mostly have fixed delivery charges basis each product and they don’t offer free delivery even with an increase in basket size/order value. So, 2 dresses of Rs 500 each would entail an Rs 100-150 delivery charge from such a seller! Adding a not-so-small 10-15% to the customer’s outlay.

One would have to wait and see how consumers react to this. But one thing is clear, the notion of Free Shipping is getting substantially redefined, if not dying entirely.

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